Einhorn’s Field of Dreams

David Einhorn’s decision to plunk $200 million on the cash-strapped NY Mets could be a bullish development for investors holding the bonds to finance the baseball team’s new stadium.

At last look, most of the bonds that were sold in 2006 to finance the construction of Citi Fields were selling for between 79 cents and 85 cents on the dollar. The distressed price for the $547 million bond issuance is a reflection of the dire financial situation the Mets are in and the reason principal owner Fred Wilpon is selling a big minority stake to Einhorn.

But if Major League Baseball approves the deal with the Greenlight Capital hedge fund manager, it could boost the value of those stadium bonds.

One reason the Citi Fields bonds are trading well below face value is out of concern the Mets–in particular the Wilpons–won’t be able to service the debt payments given the amount of red ink the team is piling up.

But some distressed investors who have been snapping up the stadium debt contend the securities are a low risk proposition since the issuer of the bonds—New York City Industrial Agency–is a part owner of the stadium. So-called vulture investors contend that since an entity controlled by the Mets technically sub-leases the stadium and some of the income to pay down the bonds comes from “revenue generated at the stadium.” The biggest risk of a default is if the Mets go out of business, move or there is a long baseball strike.

Even before Einhorn, it was unlikely that Mr. Met would be looking for new home to play in. And with Einhorn’s money, the chances of the Mets moving are almost nil.